Is China Winning the Scramble for Eurasia?

IT BEGAN in London’s early morning darkness, on June 24, when the British public’s vote to exit the European Union was confirmed. Exhausted but jubilant, Vote Leave advocates could feel their fingers on history. At their headquarters, one leader leapt onto a table and recited a passage from Shakespeare’s Henry V: “This story shall the good man teach his son.”

At the other end of the Eurasian supercontinent, another Shakespeare aficionado was rehearsing his own remarks. Jin Liqun, founding president of the Asian Infrastructure Investment Bank (AIIB) and a lifelong student of Western literature, had a few hours before kicking off the organization’s first annual meeting at the China World Hotel in Beijing. They had embarked on a “historical journey,” Jin told the audience, “towards building a new type [of] multilateral financial institution.” Officials from the United States, who declined to join the AIIB, were not in attendance.

The Bard himself could hardly have set up greater dramatic tension. Yet the contrasting scenes confirm the widespread view that today’s Western-led order is stumbling as its lead actors—notably, the United States and United Kingdom—look inward. China’s increasing importance in global affairs has also become conventional wisdom.

Less attention—certainly in Washington—has been paid to how Asian powers are reaching beyond their borders to spread their influence. Infrastructure investment is a central plot line of this story. Roads, railways and other new connections are reshaping the Eurasian supercontinent and creating new forms of competition as well as cooperation.

For example, the $62 billion China-Pakistan Economic Corridor, or CPEC, will give China access to Pakistan’s Gwadar Port and the Indian Ocean. Just over one hundred kilometers away, India and Japan are developing a competing port in southeastern Iran. Russia is playing both sides, expressing support for CPEC while backing a corridor with India that runs through Iran. Examined closely, these and other projects are windows into national ambitions.

Infrastructure projects not only reflect emerging economic and political realities but can also reshape them. Consider the Trans-Siberian Railway. Its construction helped spark the Russo-Japanese War in 1904. During World War II, it moved Russia’s heavy industries away from enemy lines. More than a century after opening, it still binds the Far East with Moscow and carries over half of the foreign cargo that passes through Russia. Similarly, many of today’s fledgling projects could shape events beyond the twenty-first century.

Since the rise of Europe’s colonial powers in the sixteenth century, Asia’s economic activity has been concentrated on its coastlines. But that could change as China, Japan, Russia and other regional powers connect Asia internally and with Europe by reaching across the Eurasian landmass. Ancient overland routes, harking back to the Silk Road, could be reawakening even as new maritime passages emerge.

At the turn of the last century, the British geographer Halford Mackinder, sometimes called the father of modern geopolitics, wrote, “Is not the pivot region of the world’s politics that vast area of Euro-Asia which is inaccessible to ships, but in antiquity lay open to the horse-riding nomads and is to-day about to be covered with a network of railways?” The same question might be asked today.

The answer could have wide-ranging implications for U.S. foreign policy. Since World War II, successive U.S. administrations have sought to prevent the rise of a hegemonic power in Eurasia. If a great power tries to assume that mantle, it will not do so invisibly, but by physically binding itself with its neighbors, through new railways, ports and other hard infrastructure. Behind many of today’s projects lurk grand ambitions.

THE SHEER scale of Asia’s infrastructure competition is staggering. The region’s infrastructure spending led the world last year, with 552 deals worth a record $131 billion. But Asia’s economies are only investing roughly half as much as they need, according to the Asian Development Bank. To maintain current levels of economic growth, eradicate poverty and respond to climate change, developing Asia alone must spend $26 trillion on infrastructure by 2030. As states ramp up their infrastructure spending to meet these goals, they are advancing rival visions for the region.

Chinese president Xi Jinping’s signature foreign-policy effort, the “Belt and Road” initiative (also known as “One Belt, One Road,” or OBOR) is at the center of this activity. Announced in 2013, OBOR includes an overland Silk Road Economic Belt and an ocean-based 21st Century Maritime Silk Road. It is a hugely ambitious endeavor. Geographically, OBOR could span sixty-five countries responsible for roughly 70 percent of the world’s population. Functionally, it aims to strengthen hard infrastructure, soft infrastructure and even cultural ties. Economically, it could ultimately entail Chinese investments approaching $4 trillion. By comparison, the Marshall Plan would cost roughly $130 billion in today’s terms.

Xi’s vision is already having an impact on business and politics in the region. In 2011, when Hewlett Packard wanted a direct rail connection between China and Europe, it had to start from scratch, work with customs officials and book an entire train. Today, companies can choose from upwards of forty transcontinental routes. In the past two years, direct railway freight shipments have been made for the first time between China and cities in Afghanistan, Iran and the United Kingdom. The changes are perhaps starkest within China, which now has over twenty-two thousand kilometers of high-speed railway track, more than the rest of the world combined.

As Asia’s economic flows shift, so do its political winds. Membership in the AIIB has climbed to eighty countries from all six continents, including numerous allies of the United States. Chinese infrastructure loans have helped persuade the Philippines and Cambodia to reevaluate military or diplomatic ties with the United States. In May, twenty-nine heads of government gathered in Beijing to discuss OBOR. “It is our hope through the Belt and Road development,” Xi said at the summit, “mankind will move closer to a community of common destiny.” But if OBOR is fully realized, the reality will be less egalitarian than Sino-centric: a Eurasian supercontinent where all roads lead to Beijing.

Tokyo sees things differently. Japan is moving to defend its incumbent advantage in Southeast Asia. For example, Prime Minister Shinzo Abe has launched a $200 billion Partnership for High Quality Infrastructure. For countries seeking foreign investment, that phrase is intended to make an implicit appeal: Japanese infrastructure is safer, more dependable and more cost effective than Chinese infrastructure. Competition has been fierce, particularly after China bested Japan for the contract to build Indonesia’s first high-speed railway. According to our “Reconnecting Asia” database, of over two thousand projects, Japan is outspending China on road and railway projects in six of nine Southeast Asian countries. But the margins are slim, and in Cambodia, Laos and Malaysia, China has pulled ahead.

While concentrated on Southeast Asia, Japan’s ambitions extend throughout the broader region. Further west, Tokyo is backing new land and maritime corridors that would increase connectivity between the Bay of Bengal and the South China Sea. In 2015, Abe became the first sitting Japanese leader to visit all five Central Asian states. Japan’s influence on infrastructure matters is magnified by its leadership in multilateral institutions, notably the Asian Development Bank (ADB), whose presidency it traditionally holds. Through the ADB and bilateral mechanisms, Tokyo is advancing higher standards for infrastructure investment, including environmental and social protections.

Sitting atop the Eurasian supercontinent, Russia casts a large shadow over the region. Due to sanctions and low oil prices, Moscow lacks the financial strength to match Beijing and Tokyo’s infrastructure spending. Instead, it has focused on a handful of strategically important projects. In the north, Russia is pursuing port and energy projects as the Arctic becomes more accessible. To its east, Russia’s primary interest is expanding energy pipelines with China. To its south, Russia aims to increase connectivity with Azerbaijan, Iran and India through the North-South Transport Corridor. To its west, Russia is building a railway bypass around Ukraine and a $4 billion bridge into Crimea.

Moscow has also focused on shaping soft infrastructure, especially economic rules and regulations. Founded in 2015, the Eurasian Economic Union creates a single market between Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. While the economic power of this group is modest, it puts Moscow at the head of the table for deciding on tariffs and customs rules for a large zone through which overland East-West trade routes must pass. Putin and Xi have even spoken publicly about “linking” the Eurasian Economic Union and OBOR, but to date, their rhetoric has not been matched by meaningful changes on the ground.

Nearly every country is jockeying to become a central node within emerging networks of transportation, trade and communication. Iran has budgeted 1 percent of its oil revenue toward expanding its railway system, which it plans to double over the next decade. To celebrate its centennial in 2023, Turkey is building thousands of kilometers of new roads and railways. India is aiming to build forty kilometers of roads a day. South Korea’s ambitions extend into the Arctic, where climate change is making shipping lanes more accessible. Some of the most rapid changes are occurring in Southeast Asia, where the Master Plan on ASEAN Connectivity envisages greater physical, institutional and people-to-people linkages among its ten member countries.